Padres development team offers $35M for Tailgate Park, plans $1.5B residential project


The city and the development team, which are in agreement on sale and development terms, are now racing to close escrow by the end of the year.

Jennifer Van Grove

March 03, 2022, 2:29 PM PT


After 14 months of negotiating, the city of San Diego and a development team led by the Padres have reached a deal on sale terms for a four-block, East Village parking lot known as Tailgate Park where the Major League Baseball club and its partners now want to build 1,800 apartments.


Wednesday, San Diego’s Economic Development & Intergovernmental Relations Committee will consider sending the deal to the full council for approval in April. The city and Padres are racing against the clock — because of state disposition laws, the transaction must close escrow by Dec. 23 or it will be aborted altogether.


The proposed transaction includes a $35.1 million purchase price for the land, requires the Padres development team to create a 1.3-acre community park, and mandates that 15 percent of the planned residential units, or 270 units, are deed restricted for lowand middle-income families.


Although there is no public subsidy, the city’s appraisal arrived at a fair market value that includes $42 million worth of credits because of site building restraints and a financial obligation associated with the existing long-term lease the Padres have for the site.


“We think this will continue to revitalize the area around the ballpark, make it a vibrant area and do that in a way that provides much needed housing, including housing that is market rate and affordable,” Padres President Erik Greupner said in an interview with the Union-Tribune. “We think it’s going to be a really good thing for the neighborhood, a really good thing for the San Diego region, and ultimately the fulfillment of that vision and promise when the ballpark was built of what that area around the ballpark can become.”

Bounded by 12th and Imperial avenues, and K and 14th streets, Tailgate Park is currently leased to the Padres through 2044 for use as a parking lot and special event space. The 5.25-acre site has been a city-owned asset since the formation of downtown’s ballpark district. It is governed by a complex set of state regulations because the parcels were transferred to the city after San Diego’s former redevelopment agency was dissolved in 2012. The land has since been on a California Department of Finance list of properties that must be divested.


San Diego marketed the property for sale in December 2019. In September 2020, it selected the Padres development team, which includes Tishman Speyer and Ascendant Capital Partners, to redevelop the property. Shortly thereafter, the parties entered into an exclusive negotiation period that was protracted by the pandemic. The site was used as a COVID-19 vaccination center in early 2021, which delayed the group’s subsurface investigations. The seismic analysis revealed active fault lines, reducing the total buildable area to 3.66 acres, the city said in a staff report prepared for council members.


The property was appraised at $76 million, but its fair market value was determined to be $34 million, said Christina Bibler, who is the city’s director of economic development. The city, she said, is obligated to credit the developer for the cost to replace 1,060 parking spaces, per the terms of its current lease with the Padres.


“The value estimate reflects uncertainty regarding the future potential cost and feasibility of contaminated soil remediation, the extent of earthquake fault lines crossing through the property and their impact on future redevelopment potential, and the costs of the 1,060 parking spaces replacement requirements pursuant to the existing lease,” the staff report says.


The latest iteration of the project, called East Village Quarter, differs greatly from the original vision. Instead of an office campus, the $1.5 billion project centers around 1,800 residential units spread across three residential towers — between 350 feet and 500 feet in height — with 1,620 underground parking spaces.


On the northwest block, which was deemed unbuildable in the seismic analysis, East Village Quarter now calls for a privately owned public park, to be paid for and operated by the developers, that will be designed in a future process. On the southeast block, the group is planning a 1,200-space parking garage to replace the existing surface spaces and accommodate baseball fans.


The project is tied together by 50,000 square feet of storefronts along a street that bisects the site and leads toward Petco Park.

“The pandemic really threw us a curveball in the sense that the work-from-home and hybrid work environments that were put in place ... have abated some of the demand for office,” said Paul DeMartini, who is an executive with New York-based real estate developer Tishman Speyer. “We thought that, based on the city’s housing needs and based on the demand that we were seeing for housing in the market, that it was more appropriate to meet that market demand to get this project into production and make it a reality sooner.”


The units will be constructed in two phases, with start dates and completion timelines to be memorialized in what’s known as a Disposition and Development Agreement, or DDA. The schedule is designed to ensure that the residences, particularly the ones that are deed restricted, are constructed in a timely fashion, Bibler said. The developer is required by the agreement to start the first phase of construction within 18 months of the close of escrow and complete 900 total units within 45 months. The entire project must be wrapped up by December 2035.


Ten percent of total units, or 180 units, will be restricted by covenant for households earning up to 60 percent of the area median income, and 90 units will be reserved for households earning up to 150 percent of the area median income. Currently, the median income for a family of four in San Diego is $95,100.


The percentage of affordable units is greater than what is required by the city’s inclusionary housing laws but less than what is being required of developers proposing to redo the city’s sports arena site in the Midway District.


“This is a significant number of affordable housing units ... 270 units is larger than what downtown has anywhere else,” Bibler said. “We evaluated the (developer’s financial model) and this is what could pencil without any reduction price (to the purchase price).”


The Tailgate Park transaction has thus far been shielded from the state’s stricter disposition laws for surplus land because the parties were under contract before December 31, 2020. However, the new rules, enforced by the California Department of Housing and Community Development, dictate that the city must close escrow on redevelopment land by the end of the year to remain exempt from the statute.



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